TSX in need of an overhaul

The TSX Venture Exchange’s (TSX-V) uncertain future rightly raises concern over the fate of the hundreds of miners and other early-stage companies listed on the exchange.

But challenges facing the TSX-V and the senior Toronto Stock Exchange (TSX) also raise questions over the health of the country’s entire venture capital ecosystem.

There’s no question Canada needs a small-cap venture venue that connects startups with the investment funds they need to survive and grow.

As pointed out in a recent Business in Vancouver story on the TSX-V’s challenges (“The small short: big problems brewing on Bay Street” – issue 1368; January 19-25), TSX-V companies have raised $100 billion in equity over the past 15 years.

Just over 600 of those companies have graduated to the TSX, and more than 10% of companies listed on the TSX with market caps of more than $1 billion are TSX-V graduates.

But the venture exchange is not well. It has lost 76% of its value over the past five years.

While its TMX Group parent company has mapped out plans to address the many challenges facing the venture exchange, Canada’s securities landscape needs more than reduced TSX-V listing complications and costs to make it more attractive to investors.

For example, in the broader national scope of investment regulation and complication, the country still does not have a single overarching securities regulator. Nor does it have an independent national prosecutor to provide effective and meaningful enforcement of Canadian securities regulations.

Because roughly 90% of initial public offerings in Canada raise funds in more than one province, establishing a single set of harmonized listing regulations and requirements to replace the complex patchwork of rules of the 13 distinct jurisdictions currently in play is key to developing a world-class investment environment.

Globally, Canada’s capital market remains a small player. Failure to remove the inefficiencies of multiple regional investment hurdles ensures that it won’t get any bigger.